Pimco sees global growth moderating in 2022, sustainable issues playing a role

Global growth will moderate next year but remain at a strong pace, bond manager Pimco said on Wednesday, with a trend toward sustainable investing creating risks and opportunities in some sectors.

Pimco portfolio managers Erin Browne and Geraldine Sundstrom made the forecast in an asset-allocation report sent by a spokeswoman. The managers wrote they expect real gross domestic product in developed markets to grow 6% this year as economies emerge from the COVID-19 pandemic, and moderate to 3% in 2022.

“Pent-up demand, high levels of consumer saving, and healthy corporate leverage ratios create a runway for private-sector-led growth,” they wrote, a background that should make growth-oriented assets attractive.

Slower vaccination rates in emerging markets have delayed their recovery, the report said, setting their GDP to grow at 3.5% this year and accelerate to 5% in 2022.

With the global economic expansion at mid-cycle, they wrote, a factor that could be different than previous recoveries is the growth of investment strategies and business practices focused on environmental, social and governance issues.

The trend should boost demand for sectors like renewable energy, semiconductors and forestry products, but could mean risky transitions for traditional oil and gas companies, Pimco wrote.

Attempts to address inequality like higher minimum wages and better working conditions “will inevitably have trickle-down effects on smaller businesses,” the authors wrote.

They also said that broader redistribution of income “could also mean more economy-wide consumption and less propensity to save.”